Saturday, April 22, 2006

Kazakh pipeline reaches Alashanko, Xinjiang

Kazakh crude flowing through a landmark pipeline opened four months ago is set to reach China in a week, helping the world's number two oil consumer cut back on imports, a Chinese industry official said.

The pipeline will ultimately supply 4.5 million tonnes this year, equivalent to about 4 per cent of China's total oil imports last year, part of Beijing's move to boost supply security with more long-term contracts from key suppliers.

"It will start feeding the refineries in May," said an official from state-run China National Petroleum Corp. (CNPC) from Beijing, referring to plants in Xinjiang and Lanzhou run by its listed subsidiary PetroChina.

PetroChina, Asia's big-gest oil and gas producer, operates refineries mostly in the country's north and supplies 40 per cent of the Chinese fuel market. The supply rate matches industry estimates that the $800 million, 600-mile (965 kilometres) pipeline would be running at half its designed capacity of 10 million tonnes a year (200,000 barrels per day) in 2006 and operate at full tilt by end-2007.

On a daily basis, the pipe-line will carry 137,000 barrels of oil to Chinese refineries from May, or about 2.3 per cent of China's current total refinery production.

The Atasu-Alashanko pipeline is China's first international crude line. China has been lobbying Moscow for over a decade to build an oil pipeline from East Siberia of Russia, the world's second-largest exporter after Saudi Arabia.

Until now China has imported Kazakh crude oil by train, taking 26,000 barrels per day (bpd) in 2005, customs data show.

The CNPC official said crude supply via rail will continue even after the flow via pipeline is underway, but he declined to give further details.

Most of the new oil will be pumped from CNPC-operated oilfields in its Central Asian neighbour, including the Aktobe field in the northwest and the Kumkol fields that CNPC recently acquired when it bought Canada's Petro-Kazakhstan.

The Kazakh-China pipe-line ends at the Chinese border town of Alashanko in the Xinjiang Uighur Autonomous Region, from where CNPC has laid a 153-mile pipeline to carry oil to its Dushanzi refinery.

PetroChina's refineries in Xinjiang as well as Lan-zhou, the fuel supply hub in the vast, remote western China region, are expected to raise crude throughout this year to process the increased supply of Kazakh oil.source GulfNews

More on Dushanzi refinery in Xinjiang

Most of crude oil fed into the Dushanzi factory will be imported through a 1,200- kilometre cross-border pipeline.

This links Atasu in Kazakhstan to Dushanzi, and is China's first major land oil import route.

Despite some suggestions, there is virtually no market for imported oil in Xinjiang, which is an oil exporting region with a population of only about 19mn. China’s major consuming markets are all far to the east. China expects to invest $1.2bn in two pipelines running east, with construction set to start simultaneously with the Kazakh project. The first line for crude would stretch some 1,500km from Shanshan in Xinjiang to a refining center in Lanzhou, in north central Gansu province. A second 1,800km line would run from Urumqi to Lanzhou, carrying what officials are calling "finished oil." Each line could handle 10mn tons annually, suggesting that they could be used for later volume increases from Kazakhstan or for Xinjiang’s own product shipments. Plans call for linking the lines to petrochemical complexes in eastern and southwestern China, although no timeframe has been given.